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GVC Seminar Series No. 16:Credit Tightening and Misallocation along Supply Chains: Evidence from Commercial Bills


王文雅 ( WANG Wenya )

School of Finance

Shanghai University of Finance and Economics­­­­­­­

Time: Dec 10th, 3:00 to 4:30pm (Beijing Time)

Zoom Meeting ID: 922 6988 5189 Passcode: 905 869


    This paper studies how shocks in bank loan induce flows of trade credit from small suppliers to large customers. Using a proprietary data with 170 thousand bank-accepted commercial bill transactions over 2011-2017, we find that banks’ goal to circumvent the tightened loan-to-deposit ratio (LDR) regulation after the 2008 financial crisis facilitated the commercial bill market in China. We find both firm- and bank-level evidence that the degree of tightened LDR regulation is associated with firms’ increased use of trade credit via commercial bills. The pattern vanishes after the removal of LDR regulation in 2015. Using commercial bills, large customer firms with bargaining powers and lower operating efficiencies delay cash payments to their small suppliers with high operating efficiencies. We provide novel evidence on trade credit as a potential channel to account for resource misallocation along supply chains.